Analysts: New iPhone will read your fingerprints

SAN FRANCISCO - Apple's latest iPhone will have fingerprint authentication, a major new technology that could give the Silicon Valley giant a valuable leg up in big markets such as enterprise computing and mobile payments, analysts and industry experts said ahead of the gadget's launch Tuesday.

Apple is expected to release a cheaper version of the iPhone in different colors for China and other developing markets, alongside a high-end version that will likely be called the iPhone 5S, according toThe Wall Street Journal. USA TODAY spoke with several people familiar with Apple's plans, but are unauthorized to speak on behalf of the company.

An Apple spokeswoman declined comment.

The top-of-the-line smartphone may offer more storage, upgraded photo-taking capabilities, a better battery and a faster chip. But what gets Wall Street and tech industry insiders excited is the fingerprint technology and the possibilities opened up for Apple by secure, easy authentication of smartphone users' identities.

"Everyone is looking at what this new phone can do, and one of the key things is fingerprint authentication," says Wells Fargo analyst Maynard Um. "People are underestimating what this technology can do."

Um raised his price-range estimate on Apple shares to $525-$575 from $485-$525 on Thursday, partly due to the potential of fingerprint authentication.

Initially, the iPhone 5S will likely have the fingerprint technology near the home button at the bottom of the device, as this is the first place users touch when they open their phones. After their identity has been verified through their print, the full display will appear automatically, without users having to swipe and enter a four-digit PIN.

"The swipe and PIN was one of the things Steve Jobs hated. It was in the way of the user experience," says Sebastien Taveau, chief technology officer of Validity Sensors.

Validity Sensors is one of the few leading, independent fingerprint authentication companies around, counting Intel and Qualcomm among its investors. The other, AuthenTec, was acquired by Apple for $356 million in 2012. Since then, Apple has sold some of AuthenTec's other technology while keeping the fingerprint sensor know-how, Taveau noted.

Identifying users through their fingerprints is more secure than passwords and PINs, so this technology could help Apple expand in sectors such as mobile payments and enterprise computing, which demand the highest levels of security, Taveau, Um and others said.

"Within the next two years the vast majority of high-end smartphones will have biometrics and mainly fingerprint logins. It's going to be very useful for payments," says David Marcus, president of PayPal, the electronic-payment division of e-commerce giant eBay.

This year, PayPal helped launch the FIDO Alliance which stands for Fast Identity Online. The group is developing common, open standards for the use of fingerprints and other biometrics to identify users - with the aim of doing away with passwords and PINs. Other members include Google, BlackBerry, Lenovo and Validity Sensors.

Such technology may turn the smartphone into a truly secure way to pay, Wells Fargo's Um says.

Banks and other payment companies may be more likely to develop apps for the iPhone with this new, secure authentication, Taveau said.

"When I touch that icon and it reads my fingerprint, my payment app and account will appear. When my wife touches the same icon on the same device, her app and account will appear," he added.

In the enterprise computing world, fingerprint authentication may help the iPhone and other Apple gadgets become more accepted by company IT departments worried about security, Taveau and Um said.

"Enterprises want to know devices are in the right hands, and this pretty much guarantees it," Um says. "This addresses enterprise security issues for Apple and will open up that market to the company more."